The United States and Canada have one of the most important trade relationships in the world.
President Donald Trump met for the first time Monday with Canadian Prime Minister Justin Trudeau.
“We have a very outstanding trade relationship with Canada,” Trump said at the news conference.
But the trade relationship between the United States and Canada over the years has not been as fluid as one might think. There have been trade wars, acts of retaliation, accusations of dumping and job losses.
“Our trade relationship is obviously strong… but the relationship has been unstable, despite the agreements we have,” says Stuart Trew, editor of the Canadian Center for Policy Alternatives, a research group in Ottawa, Canada’s capital.
Trump has often criticized Mexico and NAFTA, the trade agreement between the United States, Mexico and Canada. But he rarely mentions Canada.
However, there have been more lawsuits over NAFTA disputes against Canada (almost all by U.S. companies) than against Mexico. Even today, Canada has strict tariffs against the United States and the two sides recently resolved a bitter dispute over meat.
Most leaders and experts emphasize that trade ties between the two nations are strong and mostly positive. But Canada and the United States have had many battles along the way.
Now Trump wants to renegotiate NAFTA, which will be at the top of the agenda for his meeting with Trudeau.
1. Canada has more problems with NAFTA than Mexico
Listening to Trump, you might think that Mexico is the bad actor in NAFTA. But since the creation of NAFTA in 1994, 39 complaints have been filed against Canada, almost all of them by American companies. Known in the industry as investor-state dispute resolution, it allows companies to resolve cases under a special panel of NAFTA judges rather than local courts in Mexico, Canada or the United States.
There have only been 23 complaints against Mexico. (In comparison, companies in both Mexico and Canada have filed a total of 21 complaints against the US.)
And Canada is increasingly the target of American complaints. Since 2005, Canada has been affected by 70% of claims in NAFTA disputes, according to CCPA, a Canadian research firm.
2. The logging battle between the United States and Canada
NAFTA is not the only painful area. In 2002, the United States imposed a tariff of approximately 30% on Canadian lumber, claiming that Canada was “dumping” its lumber into the U.S. market. Canada rejected the claim and argued that the tariff cost its logging companies 30,000 jobs.
“It was a very sour point in Canada-U.S. relations for quite some time,” says Tom Velk, an economics professor at McGill University in Montreal.
The dispute originated in the 1980s, when American logging companies said their Canadian counterparts were not playing fair.
Whether Canada actually broke the rules is a matter of dispute.
Canadian officials deny that the government is subsidizing softwood lumber companies in Canada. American logging companies still say they do, and a US Commerce Department report found that Canada was providing subsidies to logging companies in 2004. It did not say whether the subsidies were ongoing.
According to the allegations, Canada subsidized logging companies because the government owns much of the land from which the timber comes. That subsidy, in addition to Canada’s huge supply of lumber, allowed Canada to price its lumber below what U.S. companies can charge.
The World Trade Organization ultimately sided with Canada, denying the United States’ claim, and the two sides reached an agreement in 2006 to end the tariff.
However, that agreement and its resulting grace period expired in October, and the two sides are at it again. The Obama and Trudeau administrations were unable to reach a compromise before Obama left office and it remains a contentious trade issue as American timber companies once again call for tariffs.
Related: ‘Without NAFTA’ we would be out of business
3. Smoot-Hawley triggers the trade war between the United States and Canada
Things got even worse during the Great Depression. In 1930, Congress wanted to protect American jobs from global trade. So the United States imposed tariffs on all countries that shipped goods to the United States in an effort to protect workers.
It was called the Smoot-Hawley Law. Today, it is widely accepted that this law made the Great Depression worse than it was.
Canada was furious and retaliated more than any other country against the United States, sparking a trade war.
“Canada was so outraged that… they raised their own tariffs on certain products to match the new U.S. tariff,” according to Doug Irwin, a Dartmouth professor and author of “Peddling Protectionism: Smoot-Hawley and the Great Depression.”
For example, the United States raised the tariff on eggs from 8 cents to 10 cents (these are 1930s prices, after all). Canada retaliated by also raising its tariff from 3 cents to 10 cents, a three-fold increase.
Exports declined sharply: in 1929, the United States exported almost 920,000 eggs to Canada. Three years later, he only shipped about 14,000 eggs, according to Irwin.
Related: Remember Smoot-Hawley: America’s Last Great Trade War
4. Canada’s sky-high tariffs on American eggs, poultry and milk
Fast forward to today. Smoot-Hawley is long gone, but Canada continues to charge high tariffs on U.S. imports of eggs, chicken and milk.
For example, some tariffs on eggs are as high as 238% per dozen, according to the Canadian Department of Agriculture. Some milk imports, depending on fat content, reach 292%.
“They are so expensive that it is not possible to transmit them. There are no American eggs in Quebec,” says Velk.
According to the Canadian Embassy in the United States, the reality is very different. Its officials say that despite some strict tariffs, Canada is one of the top export markets for American milk, poultry and eggs.
The United States applies tariffs on some goods from all countries, but they are not as high as Canada’s.
Experts say these tariffs continue to bother some American dairy and poultry producers, some of whom face the challenge of selling into the Canadian market. But they doubt much will change since the tariffs have been in place for decades.
Related: Those Reagan Tariffs Trump Loves to Talk About
5. The COOLest and the future of NAFTA
Despite all these disputes, experts highlight that this commercial relationship remains one of the best in the world.
In fact, the two countries are so interconnected now that when trade disputes break out, American companies sometimes side with Canadian companies and against American lawmakers.
For example, Canadian meat producers challenged a US law that required them to label the place of birth, raising and slaughter of livestock. The Canadians said the law discriminated against the sale of their meat in the United States and took the case to the WTO.
The WTO sided with Canada and last December Congress repealed the country of origin labeling law. American meat producers – whose businesses are intertwined with Canada – actually supported their counterparts in Canada, arguing that the regulation was too onerous.
As for Trump’s proposal to break up NAFTA, many American and Canadian experts say it is not worth renegotiating or ending the agreement. The three countries that are part of the agreement are so intertwined with each other that untangling all that integration would be detrimental to trade and economic growth.
–Editor’s note: This story was originally published on August 11, 2016. We have since updated it.
CNNMoney (New York) First published February 13, 2017: 11:11 am ET
